Ducat Protocol

Ducat Protocol is a Bitcoin L1-native credit and stablecoin protocol. Its core goal is to enable Bitcoin holders to obtain dollar liquidity without selling their BTC or giving up custody of their private keys. Users deposit BTC into a non-custodial 2-of-2 Taproot multisignature vault, and then borrow the dollar-pegged stablecoins UNIT or USDC. The entire borrowing, liquidation, and redemption logic is enforced by Bitcoin scripts and on-chain Bitcoin transactions, without relying on L2s, cross-chain bridges, or custodians.

[Main Use Cases] Ducat Protocol is primarily used for Bitcoin-collateralized lending. Users can borrow dollar stablecoins by collateralizing BTC, thereby avoiding losing upside exposure to Bitcoin by selling it. The protocol claims that borrowing has a 0% annual percentage rate (0% APR), regardless of the borrowing amount. The official statement says that selling BTC means giving up the position, whereas borrowing provides dollar liquidity while retaining full BTC exposure, allows Bitcoin to be reclaimed after repayment, and does not constitute a taxable sale event.

[Core Mechanisms and Main Capabilities]

1. Non-custodial Taproot vault: The user's BTC is locked in a 2-of-2 Taproot multisig vault, with one key owned by the user and the other held by a Guardian group (an 11-of-15 MPC threshold network). Neither party can move the funds alone. The vault can only be spent in two ways: the user repays and redeems the BTC, or it is liquidated because the collateral ratio falls below 135%. The protocol states that there is no path for rehypothecation or redirection of the Bitcoin.
2. Zero-interest borrowing: The protocol does not charge ongoing interest, but instead charges a one-time 7% minting service fee when new UNIT is minted. This fee is attached to the minting event, rather than being a loan that accrues over time. The official statement says there is no ongoing interest, no compounding, and no hidden fees, and therefore considers the zero-interest model to also be Sharia-compliant.
3. Collateral ratio and borrowing amount: Users can choose from conservative to aggressive collateral ratios, and can borrow up to 62.5% of the BTC value in the vault. The liquidation threshold is a 135% collateral ratio. The lower the collateral ratio, the less collateral is required for the loan.
4. UNIT stablecoin: UNIT is a dollar-pegged stablecoin issued natively on Bitcoin L1 based on the Runes token standard, backed by overcollateralized BTC in vaults, and softly pegged within the range of $1.01 to $1.04. The peg is maintained through overcollateralization and arbitrage: if UNIT falls below $1, buyers will buy at a low price and use it to close the vault for profit, thereby pushing the price up. UNIT can be transferred instantly and fee-free through the built-in ecash layer, and can also be redeemed 1:1 for USDC at any time.
5. Lending out USDC: users can also choose to lend out USDC. The protocol mints UNIT in the background and redeems it 1:1 for USDC through the Circle SDK, so users receive USDC directly without interacting with UNIT. Repayment works in reverse: after sending USDC, the protocol automatically handles the conversion and closes the vault.
6. Single-block redemption: users can repay at any time and redeem BTC within a single Bitcoin block.
7. Real-time monitoring: the Ducat dashboard provides real-time BTC price updates, dynamic health metrics, real-time health factors and liquidation prices, allowing users to track collateral ratios, monitor liquidation prices and adjust positions in one interface. All transactions settle on Bitcoin L1.
8. Fully verifiable: every vault and loan term is recorded on Bitcoin. Anyone can run a verifier to independently verify the entire protocol state.
9. Secure execution: the Ducat SDK builds BTC transactions locally according to the protocol specification, including a set of spending conditions, so that as long as the remaining UNIT in the vault is sufficiently collateralized, the user's BTC can be redeemed permissionlessly.
10. Liquidation participation: when a vault falls below the 135% collateral threshold, anyone can buy BTC at a discount by recapitalizing the position. Officially, each liquidation yields about 8-9% ROIC (return on invested capital).

[How to use] Users deposit BTC into a non-custodial vault, choose a collateral ratio and borrow UNIT or USDC. To repay, users repay the debt and redeem BTC within a single Bitcoin block. If USDC is chosen, Ducat automatically completes the conversion between UNIT and USDC through Circle. Users can redeem Bitcoin at any time by repaying the loan. The website requires JavaScript to be enabled to run.

[Use cases]

• Bitcoin holders who want to obtain dollar liquidity without selling BTC.
• Users who want to retain upside exposure to BTC and avoid taxable sale events.
• Users who need a dollar stablecoin but do not want to use cross-chain bridges or wrapped tokens.
• Participants willing to buy BTC at a liquidation discount.
• Developers running verifiers or monitoring on-chain protocol state.

[Restrictions and risks]

• Geographic restrictions: Ducat does not provide services to residents of North Korea, Iran, Russia, Belarus, mainland China, Cuba, Myanmar, Crimea, Donetsk or Luhansk.
• BTC price volatility risk: if the BTC price falls and causes a vault's collateral ratio to drop below 135%, the vault may be liquidated. The exact BTC price that triggers liquidation is calculated and locked at position opening and recorded on-chain.
• Oracle and Guardian risk: liquidation requires two independent confirmations, namely proof from the Chainlink oracle and verification by the Guardian against a secondary price source. If the Chainlink oracle goes down, new borrowing or liquidation cannot occur, but users' BTC remains safely stored in the vault; vaults with no outstanding debt can still be closed. The protocol is integrating a backup oracle to provide redundancy.
• Software risk: Ducat is experimental protocol software and is under active development.
• Frontend risk: if the website goes down, the frontend is open source and has community mirrors, and the protocol continues to operate through independent verifiers and Guardian on Bitcoin L1.
• The information displayed on the loan calculator is hypothetical and for illustrative purposes only and does not constitute a commitment by Ducat Protocol. Loan availability may vary by jurisdiction.

[Team and status] The protocol is built by people with experience in Bitcoin protocol development, fintech and capital markets. It is currently in Mainnet Closed Alpha · Live. The official materials provided do not state a specific launch time, audit status or complete tokenomics details.